The U.S. Department of Energy’s (DOE) queue for deciding liquefied natural gas (LNG) applications is arbitrary and unlawful, said Center for Liquefied Natural Gas President Bill Cooper.

DOE has approved LNG export applications for two projects: the Freeport LNG Terminal on Quintana Island, TX, and the Sabine Pass LNG Terminal in Cameron Parish, LA (see Daily GPI, May 20, May 23, 2011). But “the problem is that there is no certainty as to when DOE will make a decision on the remaining 15 applications,” Cooper said in testimony before a subcommittee of the House Committee on Energy and Commerce in Washington, DC, Tuesday.

“Once the public comment period ends, DOE should make a decision based on the merits of the application. DOE’s effort to proceed by arbitrarily creating its own queue to approve LNG export applications is unlawful, and essentially changes the rules midstream.”

In December, DOE announced an order of precedence for processing applications to export LNG to countries with which the United States does not have free trade agreements (FTA) (see Daily GPI, Dec. 7, 2012). The agency said it would begin processing beginning with pending DOE applications where the applicant had already received approval to begin the Federal Energy Regulatory Commission’s (FERC) pre-filing process, followed by pending DOE applications not yet in the FERC pre-filing process, and then all future DOE applications as they were received.

The queue is unlawful because it was effectively an amendment to federal regulations but was not subject to notice and comment requirements, and it because it was applied retroactively to 15 pending applications, Cooper said.

“A rule promulgated cannot have a retroactive effect unless expressly authorized by Congress,” Cooper said. “The Natural Gas Act does not authorize such retroactive application. Any new rule promulgated by DOE will have consequences to events already completed — namely, when an applicant chooses to file at DOE in the first instance.”

There are currently 16 long-term applications to export LNG to non-FTA countries pending before DOE. Officials from DOE and FERC told the subcommittee that they are moving forward with their evaluations of the various applications, but were unable to say exactly how long those processes would take.

“We’re in relatively new territory with export applications for construction,” said Jeff Wright, director of FERC’s Office of Energy Projects. “The import applications for regasification facilities were much simpler, given that we’d get all the information that we would need, including the pre-filing period, we would authorize LNG import facilities somewhere between 18-24 months. With export facilities the engineering is much more critical. It’s much more safety-conscious, environmental-conscious, because of the use of refrigerants and natural gas liquids. What we’re seeing is that we’re very dependent on the applicant being able to finish its engineering studies to supply us with the information for our evaluation…we would love to get our formal application review done in 18-24 months.”

The federal agencies are aware of each other’s application approval processes and have common goals, they said.

“We work very closely with all of these agencies within the federal government, because we have one shared mission, which is to ensure that we prudently develop what’s a very important resource, our natural resources here in the United States, particularly natural gas, and also ensure that we do so with a minimal impact on the environment,” said Christopher Smith, acting assistant secretary of the DOE’s Office of Fossil Energy.

In December DOE’s hired economists said exporting liquefied domestic natural gas would be a boon to the nation’s economy. Their study found that exporting domestically sourced LNG would generate a net benefit to the economy, with greater exports bringing greater gains. It also found that the global LNG market would act as a governor of export volumes and that the Energy Information Administration’s (EIA) “high case” scenarios for export volumes (12 Bcf/d) were unrealistic. The impact on domestic gas prices would be relatively modest (see Daily GPI, Dec. 6, 2012).

There are at least 18 LNG export projects in some stage of planning or development in the United States in addition to Cheniere’s under-construction Sabine Pass, and five more in Canada, according to analysts at Raymond James.

“Of course, many of these projects will fall by the wayside, but at this point, we think that between three and five U.S. LNG projects will come online by 2020, along with a couple in Canada,” the analysts said.

The potential impact of LNG exports on natural gas prices and the overall economy have been hotly debated for some time. Most of the discussion about whether LNG exports would be good for the country has focused on how much exports would lift domestic gas prices (see Daily GPI, May 16) or what affect U.S. exports would have on the global LNG market (see Daily GPI, Jan. 10).

Exports of liquefied natural gas (LNG) representing 5-15% of U.S. natural gas production would bring “significantly more” volatility to Henry Hub gas prices, with more exports making for greater volatility, consultancy PIRA Energy Group said last week (see Daily GPI, June 17).

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